Understanding Unspent Transaction Output (UTXO) in Crypto.

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?? What is UTXO?

Unspent Transaction Output (UTXO) is the foundation of Bitcoin’s transaction system, keeping track of unspent cryptocurrency after each transaction. Think of it as getting change after a cash purchase?— the leftover balance becomes spendable for future transactions. ??

?? How Does UTXO Work? Bitcoin uses the UTXO model?instead of a traditional account balance system. Every transaction consists of inputs (spent coins) and outputs (remaining coins). The blockchain tracks these outputs, ensuring security and preventing double spending.

? Benefits of UTXO:

• Enhanced privacy & security??? — addresses track transactions, not users.
• Prevents double spending?— each UTXO can only be used once.
• Lower fees over time?— UTXO consolidation?groups small balances into larger ones, reducing future costs.

?? Limitations of UTXO:

• Frequent consolidation needed, leading to extra transaction fees. ??
• More complex to understand?compared to account-based models like Ethereum.
• Less fungibility, making transactions harder to manage.

?? Why Does UTXO Matter? The UTXO model ensures Bitcoin’s security, privacy, and decentralization, setting it apart from Ethereum’s account-based system. While it has some inefficiencies, it remains a key innovation in blockchain technology.